The number of financial products available to individual investors has grown dramatically in recent years, resulting in many individuals being overwhelmed by the information and choices offered to them. The term "financial products" as used herein encompasses a legal representation of the right (often denoted as a claim or security) to provide or receive prospective future benefits under certain stated conditions. At any rate, individuals purchase financial products to meet their needs, and needs among individuals vary greatly.
A number of computer financial analysis systems have been developed in recent years to help individuals select the best financial products to meet their needs. These systems typically perform analysis based upon mathematical models regarding mortgage refinancing, loan amortization, retirement planning, and investment alternatives, for example.
However, typical prior art financial software packages are limited in several ways. One limitation of prior systems is the binary nature of their output. For example, given a set of personal financial data representing an initial financial state such as salary, assets, and investments, the typical simplistic calculators employed by prior art systems will indicate to a user that they will either achieve a financial goal or not, ignoring the reality that the true chance of achieving a goal is usually neither 0% nor 100% but somewhere in between. Consequently, the so called "advice" rendered by many prior art investment software packages can be misleading.
Further, some prior art financial analysis programs which focus on investments require the user to provide estimates of future inflation, interest rates and the expected return on their investments. As should be appreciated, one of the problems with this approach is the user is allowed to create scenarios that are not feasible. In this type of prior art system, the user is likely, and is in fact encouraged, to simply increase the expected investment returns until a desired portfolio value is achieved. As a result, the user creates an unrealistic future economic scenario based on unattainable portfolio returns.
In addition, the user interactions with financial analysis programs in the prior art have various other disadvantages which are overcome by the present invention. Notably, prior art systems typically do not provide realistic estimates of the retirement horizon risk-return tradeoff given a user's specific investments and financial circumstances. This makes informed judgments about the appropriate level of investment risk very difficult. The notion of a risk-return trade off is fundamental to modern portfolio theory, and any system which fails to convey long-term risk and return fails to provide information essential to making informed investment decisions.
In view of the foregoing, what is needed is a financial advisory system that focuses individuals on the financial decisions they must make today, recommends one or more specific financial products given these decisions, and, perhaps most importantly, illustrates the chance that their financial decisions combined with the recommended financial products will meet their needs in the future.
It is also desirable to incorporate an intelligent user interface that communicates the fundamental risk-return tradeoffs to help individuals evaluate investment options. For example, it is desirable to provide a system that provides a visual indication representative of the probability of achieving a financial goal rather than a binary result. Also, it is advantageous to calibrate graphical input mechanisms so that the range of inputs allowable by these mechanisms are in fact feasible based upon available products. Additionally, to provide the user with the opportunity to make informed choices among an available set of financial products, it is desirable to present realistic estimates of risk based on projected outcomes associated with the specific recommended financial products. Importantly, because there is no one way that people look at risk, it is also desirable to present various notions of risk such as short-term risk, long-term risk, and the risk of not reaching a particular financial goal.